Determine the appropriate after tax cost of debt

Reference no: EM13302575

Dublin International Corporation's marginal tax rate is 40%. It can issue 3-year bonds with a coupon rate of 8.5% and par value of $1000. The bonds can be sold now at a price of $938.90 each. The underwriters will charge $23 per bond in flotation costs. Determine the appropriate after tax cost of debt for Dublin International to use in a capital budgeting analysis.

a: 0.045
b: 0.052
c: 0.06
d: 0.072

Reference no: EM13302575

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